It’s a scary time: Unemployment’s up, the economy’s down and almost everyone’s trying to bail out of debt. A third of us have lost sleep over financial stress and worry, according to a recent survey by the National Sleep Foundation.
Money is emotional, especially these days. To reduce your debt and save more, get in touch with your spending habits, both financially and emotionally, experts say. It’s time to bond with your money and pursue a healthier relationship with it.
Flip the Script
All of us have “money scripts”: underlying attitudes and beliefs that shape our relationship with money. “They drive our financial behaviors and determine our financial health,” says financial psychologist Brad Klontz, coauthor of Wired for Wealth: Change the Money Mindsets That Keep You Trapped and Unleash Your Wealth Potential.
We usually acquire money scripts in childhood, such as “I’ll never have enough so why bother saving it?” Some people equate self-worth with net-worth, often overspending to feel good about themselves. Others spend money on gifts to show how much they love someone else. If you grew up poor, you may develop a “spend it while you have it” script, because not spending money makes you feel poor.
To identify your script and start to write a new one, delve into how you feel about money, spending and saving. Dr. Klontz suggests asking yourself these questions the next time you’re about to make a nonessential purchase: “What feeling am I looking for as a result of this purchase?” “What emotional need am I striving to fill?” “Is this something I need?” “Am I making this purchase to make myself feel better?”
Most of the time, a purchase is not about necessity. “The number-one money script in our culture is “More money or things are going to make me happier,”” says Dr. Klontz. “It’s just not true. We have decades of research showing this.”
Reigning in your spending and taking control of your financial health isn’t about punishing yourself or going without. “‘Budget’ isn’t a bad word,” says Dr. Klontz. It’s not about saving money for no reason–it’s about figuring out what you really want. “The only way to do that,” he says, “is to get honest and make sure your spending is in line with your values and your goals.”
Connect with Your Cash
One of the best ways to control your spending is to use cash instead of plastic. The form of money you use influences how much you spend, according to “Monopoly Money,” an article in the Journal of Experimental Psychology: Applied. When study participants used credit cards, they couldn’t recall how much they spent, so they kept spending.
“People just don’t seem to have an emotional reaction to spending when they use a form of money that doesn’t smell, look and feel like money,” says Priya Raghubir, Ph.D., a professor of marketing at New York University and an author of the study.
So consider switching to cash. When you pay for something in cash, there is an immediate review of what you are getting for what you are giving up, says Dr. Raghubir. When you use plastic, the visceral feeling of parting with your money is delayed, and you can enjoy immediate gratification without immediate consequences.
“The implication is, if you are trying to save, it makes a lot of sense to try to budget yourself with cash because you feel the full impact of the pain of paying,” she says. Paying in cash makes you think about whether you really want to part with that money.
The Right Balance
Ready to take charge of your spending? Start with a money journal. Donna Rosato, a senior writer at Money magazine, recommends writing down everything you spend for about six weeks in order to get a clearer picture of your spending habits. You don’t need to be a math whiz — free sites like Mint.com and Quicken.com make it easy to track and budget money. Chances are you’ll see patterns.
Then you can start to figure out your values and what really makes you feel good. What are you willing to go without so you can go to the movies every Friday night? Do you need a daily latte at Starbucks, or are you okay with brewing coffee at home and filling a to-go mug? What about bringing your lunch to work instead or ordering out, or replacing a few dinner dates with dessert and coffee dates?
Once you figure out where you are and where you want go, “start by stopping,” Rosato says. You don’t need to cut your credit cards up, but you can take them out of your wallet or switch to a debit card. “It’s still plastic, but it’s linked directly to a cash account,” says Rosato. “As long as there is a MasterCard or Visa logo, you can use it like a credit card and are protected if it’s stolen.” The built-in safeguard is that you have to be conscious of your spending or you’ll overdraw your checking account.
Money can’t buy you happiness, but understanding the emotional reasons behind your spending, and gaining control over your money by discovering new ways to find joy, just might buy you piece of mind.
Originally published on iVillage.com